Part A: Basic Economic Ideas
# 1. Monopolistic Competition
• Monopolistic competition is
# 2: Fixed Cost
• Fixed Costs are the constant costs that do not change with the quantity of output. For example, the fixed costs of a firm will be the equipment purchased for making products.
• The picture represents the theory of Fixed Cost. The shopping cart in Costco is a fixed cost of the company. Once the company purchases the shopping carts, no matter how many products the company have sold, the value of the shopping carts will not be affected.
# 3: Public Goods
• Public Goods are the goods that are produced for public consumption. For example, hospitals and schools are public goods because they are not private …show more content…
The two packs of popcorns are produced by two different companies, but they are almost the same. The prices of the two packs of popcorns are very close. They represent the firms in the perfect competition where there are many sellers and goods sold are largely identical.
# 9: Perfectly Elastic Demand
•
Goods that people will not buy if the price increases only a little have a perfectly elastic demand. The quantity demanded will decrease a lot with a little increase in the price. This situation mainly happens in a perfect competition where large identical goods are sold.
• The theory of Perfectly Elastic Demand is represented in the photo. Almost every bank offers foreign currency exchanges and the money they offer are exactly the same. If TD’s exchange rate is higher than that of CIBC’s, people will choose to go to CIBC. Therefore, the foreign currency will have a perfectly elastic demand which means nobody will buy the currency if the price increase only a little bit.
# 10: Minimum Wage
•
Minimum Wage is the minimum amount of money firms need to pay the workers per hour. The minimum hourly wage in Ontario is $11.25.
• The picture represents the theory of Minimum Wage. The cashier in the photo earns a …show more content…
For instance, when the price of movie tickets decrease, the chance of me getting the popcorns will be higher as I will be thinking about that the price of movie tickets has been so low that it is okay for me to get a popcorn. The demand of the popcorns will increase with the price of the movie tickets declines.
# 3: Perfectly Inelastic Demand
The picture on the right represents the theory of Perfectly Inelastic Demand. The products that are essential for people have Perfectly Inelastic Demand. The quantity demanded will not be affected by the price of the product because people need the product to survive. For instance, for people who have heart disease, the medicine for curing heart disease will have a perfectly inelastic demand. For people who are sick, they need the medicine to cure them. People will purchase the medicine no matter how high the price of the medicine because they may lose their lives without those medicines.
For me, the contact lens solutions will have a perfectly inelastic demand. I wear contacts a lot, so the lens solutions are essential for me. Therefore, no matter how high the price of the solutions goes, I will still buy the solution. For those people who wear contact a lot, they will do the same as me. The demand of the solutions will not change with the price of
# 1. Monopolistic Competition
• Monopolistic competition is
# 2: Fixed Cost
• Fixed Costs are the constant costs that do not change with the quantity of output. For example, the fixed costs of a firm will be the equipment purchased for making products.
• The picture represents the theory of Fixed Cost. The shopping cart in Costco is a fixed cost of the company. Once the company purchases the shopping carts, no matter how many products the company have sold, the value of the shopping carts will not be affected.
# 3: Public Goods
• Public Goods are the goods that are produced for public consumption. For example, hospitals and schools are public goods because they are not private …show more content…
The two packs of popcorns are produced by two different companies, but they are almost the same. The prices of the two packs of popcorns are very close. They represent the firms in the perfect competition where there are many sellers and goods sold are largely identical.
# 9: Perfectly Elastic Demand
•
Goods that people will not buy if the price increases only a little have a perfectly elastic demand. The quantity demanded will decrease a lot with a little increase in the price. This situation mainly happens in a perfect competition where large identical goods are sold.
• The theory of Perfectly Elastic Demand is represented in the photo. Almost every bank offers foreign currency exchanges and the money they offer are exactly the same. If TD’s exchange rate is higher than that of CIBC’s, people will choose to go to CIBC. Therefore, the foreign currency will have a perfectly elastic demand which means nobody will buy the currency if the price increase only a little bit.
# 10: Minimum Wage
•
Minimum Wage is the minimum amount of money firms need to pay the workers per hour. The minimum hourly wage in Ontario is $11.25.
• The picture represents the theory of Minimum Wage. The cashier in the photo earns a …show more content…
For instance, when the price of movie tickets decrease, the chance of me getting the popcorns will be higher as I will be thinking about that the price of movie tickets has been so low that it is okay for me to get a popcorn. The demand of the popcorns will increase with the price of the movie tickets declines.
# 3: Perfectly Inelastic Demand
The picture on the right represents the theory of Perfectly Inelastic Demand. The products that are essential for people have Perfectly Inelastic Demand. The quantity demanded will not be affected by the price of the product because people need the product to survive. For instance, for people who have heart disease, the medicine for curing heart disease will have a perfectly inelastic demand. For people who are sick, they need the medicine to cure them. People will purchase the medicine no matter how high the price of the medicine because they may lose their lives without those medicines.
For me, the contact lens solutions will have a perfectly inelastic demand. I wear contacts a lot, so the lens solutions are essential for me. Therefore, no matter how high the price of the solutions goes, I will still buy the solution. For those people who wear contact a lot, they will do the same as me. The demand of the solutions will not change with the price of